CHH Q2 Deep Dive: International Growth and Extended Stay Offset Domestic Softness

August 12, 2025 at 03:21 AM EDT

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Hotel franchisor Choice Hotels (NYSE: CHH) met Wall Street’s revenue expectations in Q2 CY2025, but sales fell by 2% year on year to $426.4 million. Its non-GAAP profit of $1.92 per share was 1% above analysts’ consensus estimates.

Is now the time to buy CHH? Find out in our full research report (it’s free).

Choice Hotels (CHH) Q2 CY2025 Highlights:

Revenue: $426.4 million vs analyst estimates of $428.3 million (2% year-on-year decline, in line)
Adjusted EPS: $1.92 vs analyst estimates of $1.90 (1% beat)
Adjusted EBITDA: $165 million vs analyst estimates of $165.8 million (38.7% margin, in line)
Management reiterated its full-year Adjusted EPS guidance of $7.04 at the midpoint
EBITDA guidance for the full year is $625 million at the midpoint, above analyst estimates of $617.7 million
Operating Margin: 29.2%, down from 30.5% in the same quarter last year
RevPAR: $58.36 at quarter end, up 10.8% year on year
Market Capitalization: $5.47 billion

StockStory’s Take

Choice Hotels delivered results in line with Wall Street’s expectations for the second quarter, as international expansion and continued investments in higher-value segments helped offset domestic revenue declines. Management attributed the quarter’s performance to robust growth in its global rooms portfolio, particularly in extended stay and upscale brands, as well as strong contributions from its recently acquired Canadian operations. CEO Patrick Pacious highlighted, “We drove 10% growth in adjusted EBITDA internationally and expanded our rooms portfolio by 5% year-over-year, highlighted by a 15% increase in hotel openings.”

Looking forward, Choice Hotels’ guidance is shaped by its focus on expanding higher-revenue segments and leveraging its global pipeline, despite ongoing macroeconomic headwinds. Management expects further growth from direct franchising in strategic markets, new brand launches, and technology investments aimed at boosting franchisee profitability. CFO Scott Oaksmith emphasized the company’s strategy, stating, "We anticipate growth will be driven by more revenue-intense hotels and markets, robust effective royalty rate growth, and strong international business."

Key Insights from Management’s Remarks

Management pointed to international expansion, extended stay momentum, and upgrades to its franchise system as primary drivers of the quarter, while also addressing the impact of macroeconomic pressures on U.S. performance.

International expansion accelerates: Choice Hotels saw strong international performance, with a 10% rise in adjusted EBITDA and a 5% year-over-year increase in international rooms, driven by new hotel openings and entry into markets such as Poland and expanded operations in Canada and China.
Canadian acquisition integration: The company acquired the remaining 50% of Choice Hotels Canada, moving to a direct franchising model in the country, which expands its addressable market and allows the full portfolio of 22 brands to be offered to Canadian franchisees. Management views Canada as an attractive market with significant growth potential and established infrastructure.
Extended stay growth outpaces industry: The domestic extended stay portfolio grew over 20% in the past five years, now comprising nearly 54,000 rooms and representing half of the domestic pipeline. Management reported a 43% increase in WoodSpring Suites franchise agreements, citing developers’ growing interest in the segment’s resilience and longer average stays.
Portfolio quality upgrades: Choice Hotels has continued to exit underperforming properties, particularly in the economy segment, making room for higher-yield hotels and improving guest satisfaction scores. This has translated to RevPAR (revenue per available room) share gains versus competitors and a stronger pipeline of domestic franchise agreements.
Technology and rewards enhancements: Investments in franchisee-facing technology, such as advanced revenue optimization tools and a redesigned website and mobile app, as well as upgrades to the Choice Privileges rewards program, have improved customer engagement and increased booking windows and length of stay.

Drivers of Future Performance

Management expects revenue growth to be led by expansion in revenue-intense brands, robust international performance, and effective cost management, while acknowledging macroeconomic uncertainty in key segments.

Global pipeline execution: Choice Hotels’ global pipeline is heavily weighted toward higher-yield brands, with 98% of rooms in revenue-intense segments. Management believes this focus will drive higher royalty rates, larger average room counts, and stronger long-term revenue growth, particularly as new direct franchising agreements mature in markets like Canada and EMEA (Europe, Middle East, and Africa).
Extended stay and business travel trends: Extended stay hotels, which offer longer stays and more stable occupancy, are expected to continue outperforming the industry. Management cited favorable demographics, infrastructure investments, and increased business travel from small and medium enterprises as supporting ongoing growth in this segment.
Macroeconomic headwinds: While management expects continued gains in key segments, they cautioned that softness in government and international travel, as well as broader economic uncertainty, could weigh on U.S. RevPAR. Cost discipline and technology-driven productivity improvements are expected to offset some of these pressures.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will watch (1) the pace of direct franchising adoption and integration in Canada and new international markets, (2) execution of the global pipeline in revenue-intense segments and realization of higher royalty rates, and (3) resilience in extended stay and business travel segments amid continued U.S. macroeconomic uncertainty. Progress on technology adoption by franchisees will also be a key signpost.

Choice Hotels currently trades at $119.06, down from $125.11 just before the earnings. Is the company at an inflection point that warrants a buy or sell? See for yourself in our full research report (it’s free).

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